<PAGE>
Goldman Sachs Funds
BALANCED FUND Semi-Annual Report July 31, 1998
Long-term capital growth
[GRAPHIC] opportunities and current income
through a carefully constructed mix of
equity and fixed income securities.
Goldman
Sachs
<PAGE>
GOLDMAN SACHS BALANCED FUND
Fund Basics
as of July 31, 1998
Assets Under Management
$255.1 Million
Number of Equity Holdings
248
NASDAQ SYMBOLS
Class A Shares
GSBFX
Class B Shares
GSBBX
Class C Shares
GSBCX
Institutional Shares
GSBIX
Service Shares
GSBSX
Mutual funds, annuities, and other investment products:
. are not FDIC insured;
. are not deposits or obligations of, or guaranteed by, any financial
institution;
. are subject to investment risks, including possible loss of the principal
amount invested.
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
January 31, 1998 - Fund Total Return Combined S&P 500 &
July 31, 1998 (based on NAV)/1/ Lehman Aggregate Index/2/
- --------------------------------------------------------------------------------
Class A 0.34% 9.57%
Class B -0.04% 9.57%
Class C -0.08% 9.57%
Institutional 0.45% 9.57%
Service 0.26% 9.57%
- --------------------------------------------------------------------------------
/1/ The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares. The Fund's performance assumes the
investment of dividends and other distributions.
/2/ The benchmark is a combination of the S&P 500 stock index (weighted at 55%)
and the Lehman Brothers Aggregate Bond Index (weighted at 45%) assuming
reinvestment of all dividends and interest. Figures do not reflect fees or
expenses. Investors cannot invest directly in the Index.
- --------------------------------------------------------------------------------
SEC TOTAL RETURN
- --------------------------------------------------------------------------------
For the period ended
7/31/98 Class A Class B Class C Institutional Service
- --------------------------------------------------------------------------------
Last 6 months/3/ -5.18% -5.04% -1.08% 0.45% 0.26%
One Year/4/ -3.42% -3.63% N/A N/A 1.97%
Five Years/4/ N/A N/A N/A N/A N/A
Since Inception 15.12%/4/ 13.14%/4/ 1.39%/3/ 3.39%/3/ 16.78%/4/,/5/
(10/12/94) (5/1/96) (8/15/97) (8/15/97) (10/12/94)
- --------------------------------------------------------------------------------
/3/ The SEC Cumulative Total Return is determined by computing the percentage
change in the value of $1,000 invested at the maximum public offering price
for the specified periods, assuming reinvestment of all distributions at
NAV. The total return calculation reflects a maximum initial sales charge
of 5.5% for Class A shares, the assumed deferred sales charge for Class B
shares (5% maximum declining to 0% after six years), and the assumed
deferred sales charge for Class C shares (1% if redeemed within 12 months
of purchase). The public offering price of the Class A shares on 7/31/98
was $21.26 and represents the NAV plus the maximum sales charge of 5.5%.
/4/ The SEC Average Annual Total Return is determined by computing the annual
percentage change in the value of $1,000 invested at the maximum public
offering price for specified periods, assuming reinvestment of all
distributions at NAV. The total return calculation reflects sales charges.
/5/ Performance data for Service shares prior to 8/15/97 is that of the Class A
shares (excluding the impact of the front-end sales charge applicable to
Class A shares since Service shares are not subject to any sales charges).
Performance of Class A shares of the Balanced Fund reflects the expenses
applicable to the Fund's Class A shares. The fees applicable to Service
shares are different from those applicable to Class A shares which impact
performance ratings and rankings for a class of shares.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS AS OF 7/31/98
- --------------------------------------------------------------------------------
Company Holding % of Total Net Assets Line of Business
- --------------------------------------------------------------------------------
Aetna Inc. 2.21% Healthcare Management
U.S. Treasury Bond 2.08% Government
Lockheed Martin Corp. 2.04% Defense
Cigna Corp. 1.97% Insurance
Raytheon Co. 1.96% Defense
Loews Corp. 1.95% Diversified Holding Companies
NationsBank Corp. 1.88% Financial Services
Fruit of the Loom Inc 1.80% Clothing Manufacturer
Quantum Corp. 1.73% Tape & Disk Drive Products
Union Carbide Corp. 1.66% Chemicals and Plastics
- --------------------------------------------------------------------------------
The top 10 holdings may not be representative of the Fund's future investments.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when redeemed,
may be worth more or less than their original cost.
<PAGE>
GOLDMAN SACHS BALANCED FUND
Market Overview
Dear Shareholder,
The stock market continued its unprecedented run into positive territory, while
the yield on the bellwether 30-year U.S. Treasury Bond dropped to its lowest
level since it was first issued approximately 20 years ago. Underscoring each
milestone was the increasingly volatile nature of the two markets.
. The U.S. Equity Market: Amid Increasing Volatility, Market Continues Its
Climb -- The U.S. stock market generated strong performance, rising into
record territory during the final month of the period under review.
Throughout, the mantle of market leadership was held by mega-cap stocks, the
largest and most liquid stocks in the Standard & Poor's 500 Index. Several
factors -- including ongoing Asian market turbulence, benign inflation and
concern about the sustainability of the current bull market -- made mega-caps
the investment of choice among U.S. investors.
. The U.S. Bond Market: Bond Prices Fluctuated Along With Investor Confidence --
Early in the period, investors were satisfied with the relative stability of
the U.S. market and the theory that Asia would have a cooling effect on the
economy. Bonds rallied, as popular opinion held that the combination of these
two factors negated the need for a Fed move. By mid-period, however, it
appeared that the impact from Asia was less severe than originally
anticipated. Investor interest in domestic bonds waned somewhat as volatility
in overseas markets subsided. For the remainder of the period, bond prices
alternately rose and fell in response to speculation regarding Fed movement,
investor interest in the wake of Asian market volatility, and waxing and
waning investor confidence in Japan.
. Outlook: Uncertainty Brings Opportunity -- We believe the recent sharp
declines in the stock market have created opportunities to buy both excellent
companies at discounted valuations and companies experiencing temporary
uncertainties at deeply depressed prices. Longer term, in our opinion, the
outlook for the economy and the stock market is favorable. We believe that
the economy will continue to expand, albeit at a moderate rate, and that
inflation will remain benign, allowing interest rates to hold steady.
Near term, the outlook for the bond market is dependent on the fortunes of
the Japanese and Asian financial sectors. Presently, we expect interest rates
will remain relatively stable, as positive domestic trends should counter any
Asian influences. Credit-related fixed income sectors should perform well in
this environment, as low interest rates spur both profit growth and investor
enthusiasm for yield. As is always the case, however, despite these generally
positive trends, all fixed income sectors remain susceptible to interest rate
surprises, earnings disappointments and policy shortfalls.
We encourage you to maintain your long-term investment program, and look
forward to serving your investment needs in the years ahead.
Sincerely,
/s/ David B. Ford /s/ John P. McNulty
David B. Ford John P. McNulty
Co-Head, Goldman Sachs Co-Head, Goldman Sachs
Asset Management Asset Management
August 31, 1998
1
<PAGE>
GOLDMAN SACHS BALANCED FUND
Performance Overview
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs Balanced Fund
for the six-month period ended July 31, 1998.
Performance Review
For the six-month period ended July 31, 1998, the Fund's share classes
underperformed the 9.57% return of its benchmark, the combined S&P 500 and
Lehman Aggregate Index.
The Fund's underperformance is primarily attributable to our mid-cap bias and
value discipline in managing the equity portion of the Fund in an environment
where mega-cap, growth companies have led the performance of the S&P 500.
We have consistently applied our investment strategy over the last five years,
performing rigorous, firsthand research into low-expectation stocks. When,
over the course of a multiyear investment horizon, short-term issues are
resolved, cycles turn, or corporate actions become evident and acknowledged by
the broader Wall Street community, we believe that our value investments
should generate solid returns for our shareholders.
Asset Performance
. Equity -- As of July 31, 1998, the Fund was 50.9% invested in equities,
compared with 53% on January 31, 1998. As a result of our bottom-up approach
to stock selection, the Fund, compared with the S&P 500 Index, was overweight
in the basic industry, consumer durables, defense/aerospace, transportation
and utilities sectors, and underweight in the consumer non-durables, consumer
services, energy, financials, health and technology sectors.
With regard to specific industries, we continued to hold no media and
communications stocks. Within healthcare, we held no pharmaceutical stocks. In
both of these industries, we felt that a positive outlook was already priced
into many companies' valuations. Conversely, we were overweight in tobacco and
tobacco-related companies, a factor that hurt performance during the second
half of the period due to ongoing litigation and concern over government
regulation. Over the longer term, we believe that these companies are
committed to rewarding shareholders and exhibit substantially better
fundamental value than their stock prices currently indicate.
. Fixed Income -- As of July 31, 1998, the Fund was 43.88% invested in fixed
income securities, compared with 43% on January 31, 1998. The Fund's fixed
income position contributed positively to performance during the period under
review. In general, the portfolio was overweighted in corporates, asset-backed
securities and mortgages. The Fund also maintained out-of-the-index
allocations to the emerging market debt, municipal and non-dollar sectors. As
is typical for the Fund, we underweighted Treasuries and agencies.
Contributors to performance included the Fund's positions in corporates,
mortgages and non-dollar securities -- most notably the Fund's positions in
German, Australian and Canadian bonds. Detractors from performance included
emerging market debt and the Fund's crossover municipal position (munis
remained persistently cheap relative to Treasuries as the Treasury market
rallied).
. Cash -- As of July 31, 1998, the Fund was approximately 6.0% invested in cash.
2
<PAGE>
GOLDMAN SACHS BALANCED FUND
STOCK SELECTION
FOLLOWS A
VALUE INVESTMENT
PROCESS
Value stocks represent companies that are currently undervalued in the market,
but whose intrinsic value we believe ultimately will be recognized. Our value
stock selection process emphasizes a bottom-up approach.
1 Search for Value
We search for value from a universe of 1,000 stocks, and then select 200 to
300 of the least expensive.
2 Fundamental Research
We refine our stock list through rigorous analysis of companies'
"fundamentals" and face-to-face meetings with company management,
competitors, suppliers and customers.
3 Risk Management
We maintain ongoing risk management resulting in an intentional and
quantifiable risk/return profile.
Portfolio Highlights
. Chase Manhattan Bank -- Chase has been a top performer throughout the period.
The stock's strong performance has been driven not only by industry-wide
appreciation, but also by Chase's announcements of a new capital allocation
structure and cost-management program.
. Ford Motor Co. -- Continuing strength in sales and new product demand, along
with the market's approval of Ford's ongoing cost-cutting strategies and
restructuring acumen, drove this stock's return well beyond its substantial
1997 gains. The earnings surge provided us with the opportunity to sell this
position as the stock surpassed our target.
Key New Acquisitions
. Crown Cork and Seal (CCK) -- CCK manufactures packaging products for consumer
goods. A recent acquisition has improved the company's cost savings and
overseas presence. At the time of purchase, CCK's stock was trading at its
lowest valuation in 10 years. We believe that CCK is poised for solid earnings
over the next few years and, as a result, will generate high cash flow, pay
down debt or repurchase shares, and reduce capital expenditures.
. Raytheon -- Raytheon, a global defense technology leader, also develops
technologies for use in commercial markets. The company recently conducted a
series of strategic acquisitions that have widely broadened its market base
and extended its industry presence. As investors were uncertain about the
course of integrating these acquisitions, Raytheon's three-companies-in-one
status discounted the stock. The defense and commercial electronics segment
represents the bulk of the company and is, in our opinion, the segment with
the greatest upside potential.
Portfolio Outlook
Within the equity portfolio, we will continue to perform rigorous, firsthand
research into low-expectation stocks. In doing so, we aim to capitalize on the
market's fear of uncertainty by investigating overdiscounted company-specific
or industry issues. We will invest in these companies when they are cheaply
priced relative to long-term earnings generating ability or hard asset values.
With regard to the fixed income portion of the portfolio, for the balance of
1998 we expect Treasury yields to remain within a fairly tight range. We
believe Fed intervention is unlikely, while global volatility should ensure
that U.S. markets remain an attractive haven for investors. However, because
the Asian question remains unresolved, sharp shifts in sentiment -- and hence,
spreads -- are likely. As a result, within the corporate and emerging market
debt sectors we are constraining much of our credit exposure to issues with
limited susceptibility to Asian influences. Furthermore, we are emphasizing
cash flow-stable securities within the interest rate-sensitive mortgage
sector.
We thank you for your investment and look forward to your continued
confidence.
Goldman Sachs U.S. Value Investment Team
Goldman Sachs U.S. Fixed Income Investment Team
August 31, 1998
3
<PAGE>
GOLDMAN SACHS BALANCED FUND
An Action Plan for Volatile Markets
When fear and uncertainty temporarily take hold of global markets, you can gain
a greater sense of control over your own investment portfolio by making sound
decisions. Whether you are a seasoned investor or a market neophyte, the
following thoughts are intended to help you maintain some perspective during
these volatile market times.
Remember the factors
you considered when you first
began investing: your long-term
objectives, time horizon, risk
tolerance and financial needs.
Stay on Course
Don't let market directions dictate your investment decisions -- avoid the
common mistake of basing decisions on emotions or uncertainty. Remember the
factors you considered when you first began investing: your long-term
objectives, time horizon, risk tolerance and financial needs.
Stay Diversified
Global diversification is one of the best defenses against uncertain markets.
Because the world's countries have varying economies, growth rates and stages of
development, they tend to offer strong performance at different times.
Diversifying among equity markets enables you to capture a wide range of
opportunities and seek maximum risk-adjusted returns.
Stay Invested
Investors often redeem at market lows because of concern or lack of
information--and negatively impact their longer-term returns. With stock
investing, the longer your holding period, the greater the likelihood of
positive returns.
Consult Your Financial Advisor
Market declines provide a good opportunity to touch base with your advisor, gain
confirmation that you are properly diversified and assess whether any recent
life events necessitate a change in asset allocation policy.
For More Information
Goldman Sachs Asset Management offers a broad spectrum of equity mutual funds
that can help you weather market ups and downs. For more information on Goldman
Sachs Funds, contact your investment professional.
4
<PAGE>
GOLDMAN SACHS BALANCED FUND
Performance Summary
July 31, 1998 (Unaudited)
The following graph shows the value as of July 31, 1998, of a $10,000 invest-
ment made (with the maximum sales charge of 5.5%) in Class A shares on Octo-
ber 12, 1994 (commencement of operations). For comparative purposes, the
performance of the Fund's benchmarks (the Standard and Poor's 500 Index ("S&P
500 Index") and the Lehman Brothers Aggregate Bond Index (LBABI)) are shown.
This performance data represents past performance and should not be consid-
ered indicative of future performance which will fluctuate with changes in
market conditions. These performance fluctuations will cause an investor's
shares, when redeemed, to be worth more or less than their original cost.
Performance of Class B, Class C, Institutional and Service shares will vary
from Class A due to differences in fees and loads.
BALANCED FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENT, DISTRIBUTIONS REINVESTED OCTOBER 12, 1994 TO
JULY 31, 1998
LOGO
Lehman Bros.
Aggregate Bond
Balanced Fund S&P 500 Index
------------- ------- --------------
10/12/94 9450 10000 10000
Oct-94 6413 10152 9987
Nov-94 9247 9782 9965
Dec-94 9351 9927 10034
Jan-95 9532 10184 10232
Feb-95 9948 10582 10476
Mar-95 10143 10895 10540
Apr-95 10379 11215 10687
May-95 10743 11664 11101
Jun-95 10959 11934 11182
Jul-95 11149 12330 11157
Aug-95 11319 12361 11292
Sep-95 11509 12883 11402
Oct-95 11455 12837 11550
Nov-95 11762 13400 11724
Dec-95 11978 13659 11888
Jan-96 12211 14123 11966
Feb-96 12275 14254 11178
Mar-96 12303 14391 11676
Apr-96 12402 14603 11610
May-96 12566 14980 11587
Jun-96 12544 15037 11742
Jul-96 12372 14372 11774
Aug-96 12544 14675 11754
Sep-96 12982 15501 11958
Oct-96 13314 15929 12224
Nov-96 14022 17133 12433
Dec-96 14102 16794 12317
Jan-97 14488 17843 12356
Feb-97 14665 17983 12386
Mar-97 14324 17244 12249
Apr-97 14759 18272 12433
May-97 15388 19384 12551
Jun-97 15745 20253 12700
Jul-97 16723 21865 13043
Aug-97 16566 20640 12932
Sep-97 17019 21772 13122
Oct-97 16720 21045 13313
Nov-97 16760 22019 13374
Dec-97 16870 22398 13509
Jan-98 17030 22647 13682
Feb-98 17852 24279 13671
Mar-98 17087 25523 13717
Apr-98 18172 25780 13789
May-98 17952 25337 13920
<TABLE>
<CAPTION>
SINCE INCEPTION
OF CLASS ONE YEAR SIX MONTHS
AVERAGE ANNUAL TOTAL RETURN THROUGH JULY 31, 1998
<S> <C> <C> <C>
CLASS A (COMMENCED OCTOBER 12, 1994)
Excluding sales charges 16.84% 2.18% 0.34%
Including sales charges 15.12% -3.42% -5.18%
----------------------------------------------------------------------------
CLASS B (COMMENCED MAY 1, 1996)
Excluding redemption charges 14.48% 1.44% -0.04%
Including redemption charges 13.48% -3.63% -5.04%
----------------------------------------------------------------------------
CLASS C (COMMENCED AUGUST 15, 1997)(A)
Excluding redemption charges 2.41% n/a -0.08%
Including redemption charges 1.39% n/a -1.08%
----------------------------------------------------------------------------
INSTITUTIONAL CLASS (COMMENCED AUGUST
15, 1997)(A) 3.39% n/a 0.45%
----------------------------------------------------------------------------
SERVICE CLASS (COMMENCED AUGUST 15,
1997)(A) 2.93% n/a 0.26%
----------------------------------------------------------------------------
</TABLE>
(a) Since inception represents cumulative total return since the class has
not been in operation for a full 12 months.
5
<PAGE>
GOLDMAN SACHS BALANCED FUND
Statement of Investments
July 31, 1998 (Unaudited)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
COMMON STOCKS - 50.0%
<C> <S> <C>
AEROSPACE/DEFENSE - 4.0%
52,300 Lockheed Martin Corp. $ 5,213,656
92,300 Raytheon Co.* 5,001,506
-----------------------------------
10,215,162
------------------------------------------------------------
AIRFREIGHT, TRUCK & OTHER - 1.3%
78,300 CNF Transportation, Inc. 3,386,475
------------------------------------------------------------
AIRLINES - 0.3%
16,400 Continental Airlines, Inc.* 877,400
------------------------------------------------------------
AUTO SUPPLIERS - 1.3%
60,300 Lear Corp.* 3,199,669
------------------------------------------------------------
AUTO/VEHICLE - 1.1%
38,600 General Motors Corp. 2,791,263
------------------------------------------------------------
BANKS - 5.6%
27,000 Banc One Corp. 1,395,563
51,600 Chase Manhattan Corp. 3,902,250
24,200 First Union Corp. 1,458,050
60,200 NationsBank Corp. 4,800,950
37,600 Pacific Century Financial Corp. 737,900
31,600 Republic of New York Corp. 1,874,275
-----------------------------------
14,168,988
------------------------------------------------------------
CHEMICAL PRODUCTS - 2.6%
97,300 IMC Global, Inc. 2,487,231
88,100 Union Carbide Corp. 4,228,800
-----------------------------------
6,716,031
------------------------------------------------------------
CONSTRUCTION/ENVIRONMENTAL SERVICES - 1.2%
72,000 Fluor Corp. 3,028,500
------------------------------------------------------------
DEPARTMENT STORES - 1.1%
55,300 Sears Roebuck & Co. 2,806,475
------------------------------------------------------------
ENERGY REFINING & MARKETING - 1.4%
124,200 Tosco Corp. 3,477,600
------------------------------------------------------------
FOREST PRODUCTS - 2.6%
56,000 Georgia Pacific Corp. 2,877,000
70,300 Georgia Pacific Corp. (Timber Group) 1,577,356
172,900 Stone Container Corp.* 2,258,506
-----------------------------------
6,712,862
------------------------------------------------------------
HEALTHCARE MANAGEMENT - 4.5%
81,500 Aetna, Inc.(d) 5,648,969
105,900 Foundation Health Systems, Inc.* 2,184,188
121,200 Tenet Healthcare Corp.* 3,628,425
-----------------------------------
11,461,582
------------------------------------------------------------
HOTELS & RESTAURANTS - 1.0%
54,800 Hilton Hotels Corp. 1,380,275
35,900 Tricon Global Restaurants, Inc.* 1,269,963
-----------------------------------
2,650,238
------------------------------------------------------------
INSURANCE BROKERS & OTHER INSURANCE - 1.9%
61,600 Loews Corp. 4,966,500
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
COMMON STOCKS - (CONTINUED)
<S> <C> <C>
INSURANCE-LIFE - 2.0%
75,900 Cigna Corp. $ 5,014,144
----------------------------------------------------
INSURANCE-PROPERTY AND CASUALTY -
0.2%
9,200 Allmerica Financial Corp.(d) 615,250
----------------------------------------------------
INTEGRATED OIL - 2.1%
32,700 Elf Aquitane ADR 2,121,413
52,000 Texaco, Inc. 3,162,250
---------------------------
5,283,663
----------------------------------------------------
LOGISTICS/RAIL - 1.1%
117,200 Canadian Pacific, Ltd. 2,798,150
----------------------------------------------------
PACKAGING - 0.5%
32,900 Crown Cork & Seal, Inc. 1,353,013
----------------------------------------------------
PC AND PERIPHERALS - 2.3%
252,800 Quantum Corp.* 4,424,000
58,400 Seagate Technology, Inc.* 1,328,600
---------------------------
5,752,600
----------------------------------------------------
REAL ESTATE - 0.3%
28,800 LNR Property Corp. 642,600
----------------------------------------------------
SEMICONDUCTORS - 2.0%
73,000 Avnet, Inc. 4,005,875
75,975 Vishay Intertechnology, Inc.* 997,172
---------------------------
5,003,047
----------------------------------------------------
STEEL - 0.3%
47,800 ISPAT International NV* 722,975
----------------------------------------------------
TEXTILES - 1.8%
147,300 Fruit of the Loom, Inc.* 4,593,919
----------------------------------------------------
TIRE & OTHER RELATED RUBBER PRODUCTS
- 1.1%
48,000 Goodyear Tire & Rubber Co. 2,925,000
----------------------------------------------------
TOBACCO - 3.3%
83,600 Philip Morris Companies Inc. 3,662,725
136,800 RJR Nabisco Holdings, Corp. 3,343,050
57,100 UST, Inc. 1,541,700
---------------------------
8,547,475
----------------------------------------------------
UTILITIES - 3.1%
73,800 Entergy Corp. 2,020,275
132,900 Northeast Utilities* 2,026,725
108,500 Unicom Corp. 3,750,031
---------------------------
7,797,031
----------------------------------------------------
TOTAL COMMON STOCKS
(COST $128,896,944) $127,507,612
----------------------------------------------------
</TABLE>
6
<PAGE>
GOLDMAN SACHS BALANCED FUND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
ASSET-BACKED SECURITIES - 5.0%
ALAC Automobile Receivables Series 1998-1, Class A(a)
$ 1,346,913 6.12% 06/15/03 $ 1,347,317
Americredit Automobile Receivables Series 1997-D, Class A3
1,100,000 6.24 09/05/03 1,119,078
Americredit Automobile Receivables Trust Series 1998-A, Class A3(d)
1,725,000 5.88 12/15/03 1,721,953
Case Equipment Loan Trust, Series 1995-A, Class A
19,307 7.30 03/15/02 19,340
Chevy Chase Auto Receivables Trust Series 1995-2, Class A
27,139 5.80 06/15/02 27,139
Discover Card Master Trust Series 1994-2, Class A
70,000 6.01 10/16/04 70,503
Discover Card Master Trust Series 1996-4, Class A
740,000 6.03 10/16/13 746,934
Discover Card Master Trust Series 1996-4, Class B
420,000 6.21 10/16/13 420,391
DVI Equipment Lease Trust
280,565 6.55 07/10/04 281,738
EQCC Home Equity Loan Trust Series 1997-3, Class A
652,467 5.83 11/15/28 653,055
Fasco Grantor Trust, Series 1996-1
123,716 6.65 11/15/01 125,353
Fingerhut Financial Services Master Trust, Series 1996-1, Class A
200,000 6.45 02/20/02 201,000
First USA Credit Card Master Trust Series 1997-6, Class A
1,350,000 6.42 03/17/05 1,372,775
First USA Credit Card Master Trust, Series 1997-5, Class A
350,000 5.80 04/17/07 350,067
MBNA Master Credit Card Master Trust
1,050,000 5.82 04/15/09 1,048,026
Mid State Trust, Series 4, Class A
697,691 8.33 04/01/30 758,169
Morgan Stanley Capital Commercial Mortgage, Inc. Series 1997-C1
400,000 7.46 05/15/06 421,776
Navistar Financial Corp. Owner Trust, Series 1995-B,
Class A3
46,636 6.05 04/15/02 46,709
PXRE Capital Trust I
65,000 8.85 02/01/27 69,616
Sears Credit Account Master Trust, Series 1995-2, Class A
700,000 8.10 06/15/04 718,151
Sears Credit Card Master Trust, Series 1995-3, Class A
70,000 7.00 10/15/04 71,313
Standard Credit Card Master Trust, Series 1995-9, Class A
360,000 6.55 10/07/07 369,000
Standard Credit Card Master Trust, Series 1994-4, Class A
110,000 8.25 11/07/03 117,184
Time Warner, Inc. Pass Thru Asset Trust(a)
575,000 4.90 07/29/99 567,186
----------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(COST $12,578,612) $ 12,643,773
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
CORPORATE BONDS - 13.1%
FINANCE BONDS - 4.9%
BankAmerica Corp.
$ 1,000,000 7.75% 07/15/02 $ 1,053,350
Beneficial Corp.
1,350,000 6.43 04/10/02 1,363,649
Capital One Bank
290,000 6.88 04/24/00 294,222
590,000 7.15 09/15/06 597,198
200,000 6.40 05/08/03 201,146
150,000 6.15 06/01/01 149,364
500,000 6.39 03/05/01 502,325
Comdisco, Inc.
965,000 6.13 01/15/03 951,799
700,000 6.29 06/30/03 702,828
Continental Bank
100,000 12.50 04/01/01 115,533
Countrywide Capital Corp.
330,000 8.05 06/15/27 369,419
Countrywide Funding Corp.
100,000 6.08 07/14/99 100,153
700,000 6.84 10/22/04 715,589
850,000 6.45 02/27/03 856,222
Edison Mission Energy Funding Corp.
83,170 6.77 09/15/03 84,282
Fleet Mortgage Group, Inc.
250,000 6.50 06/15/00 252,653
Ford Motor Credit Co.
500,000 6.00 01/14/03 497,940
Golden West Financial Corp.
200,000 10.25 12/01/00 217,856
Green Tree Financial Corp.(c)
2,000,000 6.77 06/01/30 2,002,400
Long Island Savings Bank
620,000 6.20 04/02/01 620,229
Meditrust
270,000 7.82 09/10/26 275,700
Signet Banking Corp.
500,000 9.63 06/01/99 514,080
Simon Debartolo Group LP
175,000 6.63 06/15/03 173,998
----------------------------------------------------------------------------------------------
TOTAL FINANCE BONDS
(COST $12,612,575) $ 12,611,935
----------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
GOLDMAN SACHS BALANCED FUND
Statement of Investments (continued)
July 31, 1998 (Unaudited)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
CORPORATE BONDS - (CONTINUED)
<S> <C> <C> <C>
INDUSTRIAL BONDS - 7.5%
360 Communications Co.
$ 575,000 7.12% 03/01/03 $ 595,631
Auburn Hills Trust
50,000 12.00 05/01/20 80,929
Chelsea GCA Realty, Inc.
656,000 7.75 01/26/01 671,068
Chrysler Corp., Series B
60,000 7.45 02/01/97 64,854
CMS Energy Corp.
150,000 7.38 11/15/00 151,301
Continental Airlines, Inc.
370,000 6.54 09/15/09 369,560
Corning Consumer Products(a)
250,000 9.63 05/01/08 241,250
Ford Motor Credit Co.
40,000 8.38 01/15/00 41,336
Gulf Canada Resources
110,000 9.25 01/15/04 114,408
H + T Master Trust(a)
220,000 8.06 08/15/02 220,352
Hertz Corp.
1,055,000 6.00 01/15/03 1,037,888
Intermedia Communications, Inc.
250,000 8.60 06/01/08 254,440
K Mart Corp.
200,000 8.00 12/13/01 203,408
40,000 9.60 09/15/98 40,050
Kroger Co.
750,000 12.95 02/01/09 819,720
Liberty Property LP
205,000 7.10 08/15/04 205,836
Loewen Group International, Inc.
180,000 8.25 10/15/03 190,337
News America Holdings, Inc.
325,000 9.25 02/01/13 390,995
500,000 8.50 02/15/05 548,240
Northwest Airlines Corp.
213,983 8.97 01/02/15 239,026
NWA Trust
62,400 8.26 03/10/06 66,534
NWCG Holding Corp.(c)
600,000 6.11 06/15/99 569,604
Orange PLC
500,000 8.00 08/01/08 495,625
Oryx Energy Co.
135,000 9.50 11/01/99 139,783
Owens Corning
720,000 7.50 05/01/05 729,475
Panamsat Corp.
1,080,000 6.13 01/15/05 1,062,353
Paramount Communications, Inc.
200,000 5.88 07/15/00 198,910
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
CORPORATE BONDS - (CONTINUED)
<S> <C> <C> <C>
Pep Boys, Manny, Moe & Jack
$ 200,000 7.00% 06/01/05 $ 204,856
Philip Morris Companies, Inc.
195,000 6.95 06/01/06 199,085
Riggs National Corp.
280,000 9.65 06/15/09 338,120
RJR Nabisco, Inc.
450,000 8.00 07/15/01 456,458
Rogers Cablesystems, Ltd.
115,000 9.63 08/01/02 122,763
Taubman Realty Group, LP
80,000 7.00 10/01/03 80,010
330,000 8.00 07/30/01 344,230
TCI Communications, Inc.
300,000 8.65 09/15/04 333,261
200,000 8.00 08/01/05 217,446
410,000 6.82 09/15/10 410,316
265,000 8.75 08/01/15 315,074
Tele-Communications, Inc.
125,000 9.65 10/01/03 136,180
800,000 8.25 01/15/03 860,696
Time Warner Entertainment Co. LP
445,000 9.63 05/01/02 495,681
Timer Warner, Inc.
850,000 7.95 02/01/00 872,483
565,000 7.75 06/15/05 605,443
250,000 7.98 08/15/04 268,628
TKR Cable Inc.
285,000 10.50 10/30/07 313,474
Triton Energy Ltd.
500,000 8.75 04/15/02 520,965
U.S. Home Corp.
195,000 7.95 03/01/01 198,900
US Air Inc.
319,461 8.93 04/15/08 361,377
USI American Holdings, Inc.
60,000 7.25 12/01/06 62,117
Viacom International, Inc.
95,000 10.25 09/15/01 105,149
Viasystems Inc.
125,000 9.75 06/01/07 120,625
Wharf International Capital 1994 Ltd.
130,000 8.88 11/01/04 117,268
Williams Communications Solutions, Inc.
1,125,000 6.13 02/15/02 1,120,748
WMX Technologies Inc.
320,000 6.38 12/01/03 318,320
----------------------------------------------------------------------------------------------
TOTAL INDUSTRIAL BONDS
(COST $19,103,074) $ 19,242,586
----------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
GOLDMAN SACHS BALANCED FUND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
CORPORATE BONDS - (CONTINUED)
<S> <C> <C> <C>
UTILITY BONDS - 0.8%
California Energy, Inc.
$ 350,000 10.25% 01/15/04 $ 372,379
CE Electric UK Funding Co.(a)
200,000 6.85 12/30/04 204,264
Central Maine Power Co.
100,000 7.38 01/01/99 100,459
160,000 7.45 08/30/99 161,306
National Power
120,000 8.75 11/15/02 117,480
Niagara Mohawk Power Corp.
450,000 6.88 04/01/03 457,169
Worldcom, Inc.
600,000 9.38 01/15/04 628,938
--------------------------------------------------------------------------------------------
TOTAL UTILITY BONDS
(COST $2,050,931) $ 2,041,995
--------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $33,766,580) $ 33,896,516
--------------------------------------------------------------------------------------------
EMERGING MARKET DEBT - 1.9%
Argentina Bocan
$ 634,159 5.64% 04/01/01 $ 600,960
Banco de Colombia
710,000 8.62 06/02/00 724,434
Banco Nacional de Comercio
260,000 8.00 07/18/02 257,790
Banco Nacional de Obras
30,000 9.63 11/15/03 30,765
Banco Nacional Desenvol(a)
600,000 6.69 06/16/08 597,000
Banco de Comerico Exterior(a)
30,000 8.62 06/02/00 30,610
Bridas Corp.
90,000 10.25 12/07/98 90,705
Cemex S.A. + Tolmex
110,000 10.00 11/05/99 112,915
Corp. Andina de Fomento(a)
80,000 8.38 07/29/01 81,457
Financiera Energy Nacional
20,000(a) 9.38 06/15/06 19,982
400,000 9.38 06/15/06 418,200
Grupo Industrial Durango
20,000 12.00 07/15/01 20,900
100,000 12.63 08/01/03 106,555
Grupo Televisa
170,000 11.38 05/15/03 186,278
Guangdong Enterprises Holdings Ltd.
200,000 8.88 05/22/07 147,358
Impsa Industrias Metal URG
90,000 9.50 05/31/02 80,964
Inst Fomento Industrial
210,000 8.38 07/29/01 205,964
Korea Development Bank
140,000 7.12 09/17/01 125,412
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
EMERGING MARKET DEBT - (CONTINUED)
Mrs Logistica SA
$ 100,000 10.63% 08/15/05 $ 84,225
Petroleos Mexicanos(a)
620,000 8.65 07/15/05 620,775
Poland Communications
90,000 9.88 11/01/03 86,400
YPF Sociedad Anonima
86,850 7.50 10/26/02 88,158
---------------------------------------------------------------------------------------------
TOTAL EMERGING MARKET DEBT
(COST $4,844,473) $4,717,807
---------------------------------------------------------------------------------------------
MORTGAGE BACKED OBLIGATIONS - 16.1%
Asset Securitization Corp.
$ 450,000 7.49% 04/14/27 $ 485,753
Chase Commercial Mortgage Securities Corp. Series 1997-2, Class A2
2,200,000 6.60 11/19/07 2,248,576
Collateralized Mortgage Obligation Trust Series 64, Class Z
500,876 9.00 11/20/20 530,282
Federal Home Loan Mortgage Corp. (FHLMC)
455,450 6.00 12/01/12 450,609
1,973,465 6.00 03/01/13 1,952,487
532,070 6.00 04/01/13 526,414
944,095 7.50 09/01/25 968,575
178,549 7.50 07/01/27 183,123
722,027 7.50 12/01/27 740,525
1,035,132 7.50 02/01/28 1,061,685
760,620 7.50 04/01/28 780,107
891,604 7.50 05/01/28 915,008
1,000,000 6.35 03/25/18 1,007,500
2,000,000 6.50 TBA-15 year(b) 1,978,740
Federal National Mortgage Association (FNMA)
253,043 6.50 09/01/25 252,251
271,331 6.50 10/01/25 270,482
347,975 6.50 11/01/25 346,994
553,577 6.50 09/01/27 550,632
420,393 6.50 11/01/27 418,157
946,629 6.50 06/01/13 951,656
992,689 6.00 04/01/13 980,896
1,059,480 6.50 06/01/13 1,065,434
992,311 6.00 04/01/13 980,522
4,000,000 6.50 TBA-30 year(b) 3,978,720
3,000,000 7.00 TBA-30 year(b) 3,042,180
First Union-Lehman Brothers Commercial Mortgage Services Series 1997-C1,
Class A2
300,000 7.30% 12/18/06 317,505
First Union-Lehman Brothers Commercial Mortgage Services Series 1997-C2,
Class A2
700,000 6.60 11/18/29 712,201
FNMA Remic Trust Series 31, Class PJ
1,000,000 6.55 10/25/20 1,015,000
</TABLE>
9
<PAGE>
GOLDMAN SACHS BALANCED FUND
Statement of Investments (continued)
July 31, 1998 (Unaudited)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS - (CONTINUED)
Government National Mortgage Association (GNMA)
$ 263,871 7.00 02/15/23 $ 268,407
42,426 8.00 04/15/23 44,150
139,216 7.00 05/15/23 141,609
43,397 7.00 05/15/23 44,143
721,857 7.50 05/15/23 743,506
850,876 7.00 07/15/23 865,502
730,469 7.00 08/15/23 743,025
682,441 7.00 09/15/23 694,172
447,023 8.00 06/15/26 463,786
89,923 8.00 07/15/26 93,295
33,157 8.00 09/15/26 34,401
389,552 8.00 09/15/26 404,688
456,034 8.00 12/15/26 473,135
498,629 8.00 12/15/26 517,327
793,889 7.50 01/15/27 816,959
28,737 8.00 05/15/27 29,815
468,050 8.00 05/15/27 485,457
472,826 8.00 06/15/27 490,557
898,187 8.00 05/15/28 931,869
49,635 8.00 05/15/28 51,496
2,000,000 6.50 TBA-30 year(b) 1,993,740
Merrill Lynch Mortgage Investors, Inc. Series 1998-C2, Class A2
2,000,000 6.39 02/15/30 2,016,516
------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(COST $40,737,991) $ 41,059,569
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
SOVEREIGN CREDIT - 1.0%
Federal Republic of Brazil(c)
$ 97,000 11.01% 04/15/06 $ 82,178
Province of Quebec
200,000 13.25 09/15/14 223,726
Province of Tucuman
232,143 9.45 08/01/04 219,027
Republic of Argentina
600,000 8.75 05/09/02 580,875
Republic of Korea
410,000 8.75 04/15/03 394,859
Republic of Panama
387,700 6.84 05/10/02 381,329
520,000 7.88 02/13/02 514,591
State of Israel
190,000 6.38 12/15/05 188,602
----------------------------------------------------------------------------------------------
TOTAL SOVEREIGN CREDIT
(COST $2,625,808) $ 2,585,187
----------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.4%
Federal National Mortgage Association (FNMA) Principal-Only Stripped
Security(c)
$ 4,000,000 6.07% 10/09/19 $ 1,132,480
----------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $1,154,873) $ 1,132,480
----------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
GOLDMAN SACHS BALANCED FUND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 5.7%
United States Treasury Bonds
$ 470,000 12.00% 08/15/13 $ 692,150
3,900,000 8.75 05/15/20 5,299,125
2,900,000 7.88 02/15/21 3,641,298
United States Treasury Notes
500,000 6.63 07/31/01 514,845
United States Treasury Principal-Only Stripped Securities(c)
4,000,000 5.62 11/15/04 2,823,800
2,450,000 5.90 05/15/20 691,856
80,000 5.46 08/15/99 75,650
2,270,000 5.87 08/15/14 901,288
----------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $14,315,026) $ 14,640,012
----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 10.4%
Joint Repurchase Agreement Account(d)
$26,600,000 5.85% 08/03/98 $ 26,600,000
----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $26,600,000) $ 26,600,000
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $265,520,307)(E) $264,782,956
----------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
GOLDMAN SACHS BALANCED FUND
Statement of Investments (continued)
July 31, 1998 (Unaudited)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
-----------------------------
<S> <C> <C>
FEDERAL INCOME TAX INFORMA-
TION:
Gross
unrealized gain
for investments
in which value
exceeds cost $11,054,184
Gross
unrealized loss
for investments
in which cost
exceeds value (11,843,153)
-----------------------------
Net unrealized
gain $ (779,969)
-----------------------------
</TABLE>
Futures contracts open at July 31, 1998 are as follows:
<TABLE>
<CAPTION>
Number of
Contracts
Long/ Settlement Unrealized
Type (Short)(f) Month Gain/(Loss)
- -------------------------------------------------------------------
<S> <C> <C> <C>
90-Day Eurodollar 10 September 1998 $(1,688)
90-Day Eurodollar (9) March 1999 (1,520)
90-Day Eurodollar (9) June 1999 (1,407)
2-Year U.S. Treasury Note 10 September 1998 561
5-Year U.S. Treasury Note 16 September 1998 4,758
10-Year U.S. Treasury Bond 33 September 1998 7,134
20-Year U.S. Treasury Bond (3) September 1998 (4,964)
-------
$ 2,874
------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) Security is exempt from registration under Rule 144A of the Securities
Act of 1933. Such securities may be resold, normally to qualified insti-
tutional buyers in transactions exempt from registration. Total market
value of the Rule 144A securities amounted to $3,930,193 as of July 31,
1998.
(b) TBA (To Be Assigned) securities are purchased on a forward commitment ba-
sis with an approximate (generally + / -2.5%) principal amount and no
definite maturity date. The actual principal amount and maturity date
will be determined upon settlement when the specific mortgage pools are
assigned.
(c) The interest rate disclosed for these securities represents effective
yields to maturity.
(d) Portions of these securities are being segregated as collateral for
futures contracts, TBA securities, mortgage dollar rolls and extended
settlement securities.
(e) The aggregate cost for federal income tax purposes is $265,562,925.
(f) Each 90-Day Eurodollar contract represents $1,000,000 in notional par
value. Each 2-year U.S. Treasury Note contract represents $200,000 in
notional par value. Each 5-Year, 10-Year and 20-Year U.S. Treasury Note
contract represents $100,000 in notional par value. The net notional
amount and market value at risk are $35,200,000 and $14,551,525, respec-
tively. The determination of notional amounts does not consider market
risk factors and therefore notional amounts as presented here are indica-
tive only of volume of activity and not a measure of market risk.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
12
<PAGE>
GOLDMAN SACHS BALANCED FUND
Statement of Assets and Liabilities
July 31, 1998 (Unaudited)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
ASSETS:
<TABLE>
<S> <C> <C>
Investment in securities, at value (identified cost
$265,520,307) $264,782,956
Cash, at value 185,059
Receivables:
Investment securities sold 9,576,556
Fund shares sold 1,292,893
Dividends and interest, at value 1,249,652
Deferred organization expenses, net 16,081
Other assets 191,142
-------------------------------------------------------------------------------
TOTAL ASSETS 277,294,339
-------------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased 21,222,344
Forward foreign currency exchange contracts 25,956
Fund shares repurchased 391,315
Variation margin 375
Amounts owed to affiliates 484,167
Accrued expenses and other liabilities 52,887
-------------------------------------------------------------------------------
TOTAL LIABILITIES 22,177,044
-------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital 244,441,973
Accumulated undistributed net investment income 571,765
Accumulated undistributed net realized gain on investment,
futures and foreign currency transactions 10,863,933
Net unrealized loss on investments, futures and translation
of assets and liabilities denominated in foreign currencies (760,376)
-------------------------------------------------------------------------------
NET ASSETS $255,117,295
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------------------------------------------------------------------------
<S> <C> <C> <C>
Total shares of beneficial interest
outstanding, $.001 par value (unlimited shares
authorized) 9,526,414 1,946,992 786,453
Net asset and Class A redemption value per
share(a) $20.09 $19.99 $19.95
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE
--------------------------------------------------------------------------
<S> <C> <C>
Total shares of beneficial interest outstanding,
$.001 par value (unlimited shares authorized) 430,378 22,250
Net asset value, offering and redemption price per
share $20.09 $20.08
--------------------------------------------------------------------------
</TABLE>
(a)Maximum public offering price per share (NAV X 1.0582) for Class A shares
is $21.26. At redemption, Class B and C Shares may be subject to a contingent
deferred sales charge assessed on the amount equal to the lesser of the
current net asset value or the original purchase price of the shares.
13
<PAGE>
GOLDMAN SACHS BALANCED FUND
Statement of Operations
For the Six Months Ended July 31, 1998 (Unaudited)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends(a) $ 1,056,222
Interest(b) 3,644,966
------------------------------------------------------------------------------
TOTAL INCOME 4,701,188
------------------------------------------------------------------------------
EXPENSES:
Management fees 791,642
Distribution fees 408,813
Authorized dealer service fees 292,479
Transfer agent fees 178,766
Custodian fees 77,020
Professional fees 30,838
Registration fees 48,536
Amortization of deferred organization expenses 6,660
Trustee fees 2,783
Other 26,981
------------------------------------------------------------------------------
TOTAL EXPENSES 1,864,518
------------------------------------------------------------------------------
Less -- expenses reimbursed and fees waived by Goldman Sachs (483,862)
------------------------------------------------------------------------------
NET EXPENSES 1,380,656
------------------------------------------------------------------------------
NET INVESTMENT INCOME 3,320,532
------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT, FUTURES AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investment transactions 6,460,160
Futures transactions (7,762)
Foreign currency related transactions 25,530
Net change in unrealized gain (loss) on:
Investments (11,562,491)
Futures (27,001)
Translation of assets and liabilities denominated in foreign
currencies (21,134)
------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT FUTURES AND
FOREIGN CURRENCY TRANSACTIONS (5,132,698)
------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (1,812,166)
------------------------------------------------------------------------------
</TABLE>
(a) Taxes withheld on dividends were $2,546.
(b) Taxes withheld on interest were $2,911.
14
<PAGE>
GOLDMAN SACHS BALANCED FUND
Statements of Changes in Net Assets
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE
JULY 31, 1998 YEAR ENDED
(UNAUDITED) JANUARY 31, 1998
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 3,320,532 $ 3,841,192
Net realized gain on investment, futures
and foreign currency related
transactions 6,477,928 13,321,612
Net change in unrealized gain (loss) on
investments, futures and translation of
assets and liabilities denominated in
foreign currencies (11,610,626) 2,251,255
------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (1,812,166) 19,414,059
------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A shares (2,529,348) (3,280,878)
Class B shares (347,480) (212,816)
Class C shares (140,623) (37,737)
Institutional shares (141,516) (51,094)
Service shares (204) (160)
In excess of net investment income
Class B shares -- (503)
Class C shares -- (6,260)
Institutional shares -- (19,503)
Service shares -- (42)
From net realized gain on investment and
futures transactions
Class A shares -- (8,192,911)
Class B shares -- (995,615)
Class C shares -- (180,689)
Institutional shares -- (164,436)
Service shares -- (530)
In excess of net realized gain on in-
vestment and futures transactions
Class C shares -- (146,227)
Institutional shares -- (259,970)
Service shares -- (321)
------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (3,159,171) (13,549,692)
------------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Net proceeds from sales of shares 76,297,561 123,854,644
Reinvestment of dividends and
distributions 2,728,650 12,247,021
Cost of shares repurchased (23,445,824) (20,977,914)
------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM SHARE TRANSACTIONS 55,580,387 115,123,751
------------------------------------------------------------------------------
TOTAL INCREASE 50,609,050 120,988,118
------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 204,508,245 83,520,127
------------------------------------------------------------------------------
End of period $255,117,295 $204,508,245
------------------------------------------------------------------------------
ACCUMULATED UNDISTRIBUTED NET INVESTMENT
INCOME $ 571,765 $ 410,404
------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
GOLDMAN SACHS BALANCED FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS(E) DISTRIBUTIONS TO SHAREHOLDERS
--------------------------- ------------------------------------------------
NET REALIZED
AND UNREALIZED
GAIN (LOSS) ON IN EXCESS OF
INVESTMENT, FROM NET NET REALIZED
NET ASSET FUTURES AND IN EXCESS REALIZED GAIN GAIN ON NET INCREASE
VALUE, NET FOREIGN CURRENCY FROM NET OF NET ON INVESTMENT INVESTMENT (DECREASE)
BEGINNING INVESTMENT RELATED INVESTMENT INVESTMENT AND FUTURES AND FUTURES IN NET ASSET
OF PERIOD INCOME TRANSACTIONS INCOME INCOME TRANSACTIONS TRANSACTIONS VALUE
FOR THE SIX MONTHS ENDED JULY 31, (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 - Class A
Shares $20.29 $0.29 $(0.21) $(0.28) $ -- $ -- $ -- $(0.20)
1998 - Class B
Shares 20.20 0.20 (0.20) (0.21) -- -- -- (0.21)
1998 - Class C
Shares 20.17 0.20 (0.21) (0.21) -- -- -- (0.22)
1998 - Institu-
tional Shares 20.29 0.32 (0.21) (0.31) -- -- -- (0.20)
1998 - Service
Shares 20.28 0.26 (0.21) (0.25) -- -- -- (0.20)
FOR THE YEARS ENDED JANUARY 31,
1998 - Class A
Shares 18.78 0.57 2.66 (0.56) -- (1.16) -- 1.51
1998 - Class B
Shares 18.73 0.50 2.57 (0.42) (0.02) (1.16) -- 1.47
1998 - Class C
Shares(b) 21.10 0.25 0.24 (0.22) (0.04) (0.64) (0.52) (0.93)
1998 - Institu-
tional Shares(b) 21.18 0.26 0.32 (0.23) (0.08) (0.45) (0.71) (0.89)
1998 - Service
Shares(b) 21.18 0.22 0.32 (0.22) (0.06) (0.72) (0.44) (0.90)
-----------------------------------------------------------------------------------------------------------------------
1997 - Class A
Shares 17.31 0.66 2.47 (0.66) -- (1.00) -- 1.47
1997 - Class B
Shares(b) 17.46 0.42 2.34 (0.42) (0.07) (1.00) -- 1.27
-----------------------------------------------------------------------------------------------------------------------
1996 - Class A
Shares 14.22 0.51 3.43 (0.50) -- (0.35) -- 3.09
FOR THE PERIOD ENDED JANUARY 31,
1995 - Class A
Shares(b) 14.18 0.10 0.02 (0.08) -- -- -- 0.04
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the
period, reinvestment of all dividends and distributions, a complete
redemption of the investment at the net asset value at the end of
the period and no sales or redemption charges. Total return would be
reduced if a sales or redemption charge were taken into account.
(b) Class A and Class B share activity commenced on October 12, 1994 and
May 1, 1996, respectively. Class C, Institutional and Service share
activity commenced on August 15, 1997.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
(f) Includes the effect of mortgage dollar roll transactions.
16
<PAGE>
GOLDMAN SACHS BALANCED FUND
<TABLE>
<CAPTION>
RATIO OF
NET ASSETS RATIO OF NET INVESTMENT
NET ASSET PORTFOLIO AT END OF NET EXPENSES INCOME TO
VALUE, END TOTAL TURNOVER PERIOD TO AVERAGE AVERAGE NET
OF PERIOD RETURN(A) RATE(F) (IN 000S) NET ASSETS ASSETS
<CAPTION>
RATIOS ASSUMING NO VOLUNTARY WAIVER
OF FEES OR EXPENSE LIMITATIONS
-----------------------------------
RATIO OF
RATIO OF NET INVESTMENT
NET ASSET EXPENSES TO INCOME (LOSS) TO
VALUE, END AVERAGE NET AVERAGE NET
OF PERIOD ASSETS ASSETS
<S> <C> <C> <C> <C> <C>
$20.09 0.34%(d) 69.31%(d) $191,408 1.00%(c) 2.86%(c)
19.99 (0.04)(d) 69.31(d) 38,923 1.75(c) 2.11(c)
19.95 (0.08)(d) 69.31(d) 15,693 1.75(c) 2.12(c)
20.09 0.45(d) 69.31(d) 8,646 0.75(c) 3.11(c)
20.08 0.26(d) 69.31(d) 447 1.25(c) 2.51(c)
<S> <C> <C>
1.45%(c) 2.41%(c)
1.95(c) 1.91(c)
1.95(c) 1.92(c)
0.95(c) 2.91(c)
1.45(c) 2.31(c)
20.29 17.54 190.43 163,636 1.00 2.94
20.20 16.71 190.43 23,639 1.76 2.14
20.17 2.49(d) 190.43 8,850 1.77(c) 2.13(c)
20.29 2.93(d) 190.43 8,367 0.76(c) 3.13(c)
20.28 2.66(d) 190.43 16 1.26(c) 2.58(c)
- -------------------------------------------------------------------------------
18.78 18.59 208.11 81,410 1.00 3.76
18.73 16.22(d) 208.11 2,110 1.75(c) 2.59(c)
- -------------------------------------------------------------------------------
17.31 28.10 197.10 50,928 1.00 3.65
1.57 2.37
2.07 1.83
2.08(c) 1.82(c)
1.07(c) 2.82(c)
1.57(c) 2.27(c)
- -------------------------------------------------------------------------------
1.77 2.99
2.27(c) 2.07(c)
- -------------------------------------------------------------------------------
1.90 2.75
14.22 0.87(d) 14.71 7,510 1.00(c) 3.39(c)
- -------------------------------------------------------------------------------
8.29(c) (3.90)(c)
- -------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
GOLDMAN SACHS BALANCED FUND
Notes to Financial Statements
July 31, 1998 (Unaudited)
1. ORGANIZATION
Goldman Sachs Trust (the "Trust") is a Delaware business trust registered un-
der the Investment Company Act of 1940 (as amended) as an open-end, manage-
ment investment company. The Trust includes the Goldman Sachs Balanced Fund
(the "Fund"). At July 31, 1998, the Fund offers five classes of shares --
Class A, Class B, Class C, Institutional and Service.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies consist-
ently followed by the Fund. The preparation of financial statements in con-
formity with generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts.
A. INVESTMENT VALUATION -- Investments in securities traded on a U.S. or for-
eign securities exchange or the NASDAQ system are valued daily at their last
sale or closing price on the principal exchange on which they are traded or
NASDAQ. If no sale occurs, securities traded on a U.S. exchange or NASDAQ are
valued at the mean between the closing bid and asked price, and securities
traded on a foreign exchange will be valued at the last sale price on valua-
tion date or, if no sale occurs at the official bid price. Unlisted equity
and debt securities for which market quotations are available are valued at
the mean between the most recent bid and asked prices. Debt securities are
valued at prices supplied by an independent pricing service, which reflect
broker / dealer-supplied valuations and matrix pricing systems. Short-term
debt obligations maturing in sixty days or less are valued at amortized cost.
Restricted securities, and other securities for which quotations are not
readily available, are valued at fair value using methods approved by the
Board of Trustees of the Trust.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are recorded on the trade date. Realized gains and losses on sales of invest-
ments are calculated on the identified-cost basis. Dividend income is re-
corded on the ex-dividend date. Dividends for which the Fund has the choice
to receive either cash or stock are recognized as investment income in an
amount equal to the cash dividend. Interest income is determined on the basis
of interest accrued, premium amortized and discount earned. The Fund does not
amortize premiums on U.S. Government and corporate bonds. In addition, it is
the Fund's policy to accrue for estimated capital gains taxes on foreign se-
curities held.
C. MORTGAGE DOLLAR ROLLS -- The Fund may enter into mortgage "dollar rolls"
in which the Fund sells securities in the current month for delivery and si-
multaneously contracts with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. For financial reporting and tax reporting purposes, the Fund treats
mortgage dollar rolls as two separate transactions; one involving the pur-
chase of a security and a separate transaction involving a sale.
18
<PAGE>
GOLDMAN SACHS BALANCED FUND
D. FOREIGN CURRENCY TRANSLATIONS -- The books and records of the Fund are
maintained in U.S. dollars. Amounts denominated in foreign currencies are
translated into U.S. dollars on the following basis: (i) investment valua-
tions, other assets and liabilities initially expressed in foreign currencies
are converted each business day into U.S. dollars based on current exchange
rates; (ii) purchases and sales of foreign investments, income and expenses
are converted into U.S. dollars based on currency exchange rates prevailing
on the respective dates of such transactions.
Net realized and unrealized gain (loss) on foreign currency transactions
will represent: (i) foreign exchange gains and losses from the sale and hold-
ings of foreign currencies; (ii) gains and losses between trade date and set-
tlement date on investment securities transactions and forward exchange
contracts; and (iii) gains and losses from the difference between amounts of
dividends and interest recorded and the amounts actually received.
E. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Fund is authorized to
enter into forward foreign currency exchange contracts for the purchase of a
specific foreign currency at a fixed price on a future date as a hedge or
cross-hedge against either specific transactions or portfolio positions or to
seek to increase total return. All commitments are "marked-to-market" daily
at the applicable translation rates and any resulting unrealized gains or
losses are recorded in the Fund's financial statements. The Fund records re-
alized gains or losses at the time the forward contract is offset by entry
into a closing transaction or extinguished by delivery of the currency. Risks
may arise upon entering these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
F. SHORT SECURITIES POSITIONS -- The Fund may enter into covered short sales.
Short securities positions are accounted for at cost and subsequently marked
to market to reflect the current market value of the position. The market
value of the short position is recorded as a liability on the Fund's records
and any difference between this market value and cash received is reported as
unrealized gain or loss. Gains and losses are realized when a short position
is closed out by delivering securities back to the broker.
G. FEDERAL TAXES -- It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute each year substantially all of its investment company taxable
income and capital gains to its shareholders. Accordingly, no federal tax
provision is required. The characterization of distributions to shareholders
for financial reporting purposes is determined in accordance with income tax
rules. Therefore, the source of the Fund's distributions may be shown in the
accompanying financial statements as either from or in excess of net invest-
ment income or net realized gain on investment transactions, or from capital,
depending on the type of book / tax differences that may exist as well as
timing differences associated with having different book and tax year ends.
H. DEFERRED ORGANIZATION EXPENSES -- Organization-related costs are being am-
ortized on a straight-line basis over a period of five years.
I. EXPENSES -- Expenses incurred by the Trust which do not specifically re-
late to an individual fund of the Trust are generally allocated to the funds
based on each Fund's relative net assets.
Class A, Class B and Class C shares bear all expenses and fees relating to
the distribution and authorized dealer service plans as well as other ex-
penses which are directly attributable to such shares. Service shares sepa-
rately bear a service class fee payable monthly to service organizations for
their services.
19
<PAGE>
GOLDMAN SACHS BALANCED FUND
Notes to Financial Statements (continued)
July 31, 1998 (Unaudited)
J. OPTION ACCOUNTING PRINCIPLES -- When the Fund writes call or put options,
an amount equal to the premium received is recorded as an asset and as an
equivalent liability. The amount of the liability is subsequently marked-to-
market to reflect the current market value of the option written. When a
written option expires on its stipulated expiration date or the Fund enters
into a closing purchase transaction, the Fund realizes a gain or loss without
regard to any unrealized gain or loss on the underlying security, and the li-
ability related to such option is extinguished. When a written call option is
exercised, the Fund realizes a gain or loss from the sale of the underlying
security, and the proceeds of the sale are increased by the premium origi-
nally received. When a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security which the
Fund purchases upon exercise. There is a risk of loss from a change in value
of such options which may exceed the related premiums received.
Upon the purchase of a call option or a protective put option by the Fund,
the premium paid is recorded as an investment and subsequently marked-to-mar-
ket to reflect the current market value of the option. If an option which the
Fund has purchased expires on the stipulated expiration date, the Fund will
realize a loss in the amount of the cost of the option. If the Fund enters
into a closing sale transaction, the Fund will realize a gain or loss, de-
pending on whether the sale proceeds from the closing sale transaction are
greater or less than the cost of the option. If the Fund exercises a pur-
chased put option, the Fund will realize a gain or loss from the sale of the
underlying security, and the proceeds from such sale will be decreased by the
premium originally paid. If the Fund exercises a purchased call option, the
cost of the security which the Fund purchases upon exercise will be increased
by the premium originally paid.
K. FUTURES CONTRACTS -- The Fund may enter into futures transactions to hedge
against changes in interest rates, securities prices, currency exchange rates
or to seek to increase total return.
Upon entering into a futures contract, the Fund is required to deposit with
a broker an amount of cash or securities equal to the minimum "initial mar-
gin" requirement of the respective futures exchange. Subsequent payments for
futures contracts ("variation margin") are paid or received by the Fund dai-
ly, dependent on the daily fluctuations in the value of the contracts, and
are recorded as unrealized gains or losses. When contracts are closed, the
Fund realizes a gain or loss which is reported in the Statement of Opera-
tions.
The use of futures contracts involve, to varying degrees, elements of mar-
ket and counterparty risk which may exceed the amounts recognized in the
Statement of Assets and Liabilities. Changes in the value of the futures con-
tract may not directly correlate with changes in the value of the underlying
securities. This risk may decrease the effectiveness of the Fund's hedging
strategies and potentially result in a loss.
3. AGREEMENTS
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), acts as the Fund's investment adviser
pursuant to an Investment Management Agreement (the "Agreement"). Under the
Agreement, GSAM, subject to the general supervision of the Trust's Board of
Trustees, manages the Fund's portfolio. As compensation for the services ren-
dered under the Agreement, the assumption of the expenses related thereto and
administering the Fund's business affairs, including providing facilities,
GSAM is entitled to a fee, computed daily and payable monthly, at an annual
rate equal to .65% of the average daily net assets of the Fund.
20
<PAGE>
GOLDMAN SACHS BALANCED FUND
During the six months ended July 31, 1998, Goldman Sachs voluntarily agreed
to reduce or limit certain "Other Expenses" for the Fund (excluding manage-
ment, service, distribution and authorized dealer service fees and litigation
and indemnification costs, taxes, interest, brokerage commissions and ex-
traordinary expenses) to the extent such expenses exceeded .10% of the aver-
age daily net assets of the Fund. Goldman Sachs reimbursed approximately
$250,000 during the six months ended July 31, 1998. At July 31, 1998 approxi-
mately $148,000 is owed to the Fund. Effective September 1, 1998, this ex-
pense limitation has been modified.
Goldman Sachs serves as the Distributor of shares of the Fund pursuant to a
Distribution Agreement. Goldman Sachs may receive a portion of the Class A
sales load and Class B and Class C contingent deferred sales charge imposed
and has advised the Company that it retained approximately $206,000 during
the period ended July 31, 1998.
The Trust, on behalf of the Fund, has adopted Distribution Plans (the "Dis-
tribution Plans") pursuant to Rule 12b-1. Under the Distribution Plans,
Goldman Sachs is entitled to a quarterly fee from the Fund for distribution
services equal, on an annual basis, to .25%, .75% and .75% of the Fund's av-
erage daily net assets attributable to Class A, Class B and Class C shares,
respectively.
For the six months ended July 31, 1998, the Distributor has voluntarily
agreed to waive approximately $234,000 of its distribution fee attributable
to the Class A shares. The Distributor may discontinue or modify this waiver
in the future at its discretion.
The Trust, on behalf of the Fund, has adopted Authorized Dealer Service
Plans (the "Dealer Service Plans") pursuant to which Goldman Sachs and Autho-
rized Dealers are compensated for providing personal and account maintenance
services. The Fund pays a fee under its Dealer Service Plans equal, on an an-
nual basis, to .25% of its average daily net assets attributable to Class A,
Class B and Class C shares. Goldman Sachs also serves as the Transfer Agent
of the Fund for a fee. Effective September 1, 1998 fees charged for such
transfer agent services are as follows: 0.19% of average daily net assets for
Class A, Class B and Class C Shares and 0.04% of average daily net assets for
Institutional and Service Class Shares.
The Trust, on behalf of the Fund, has adopted a Service Plan. This plan al-
lows for Service shares to compensate service organizations for providing va-
rying levels of account administration and shareholder liaison services to
their customers who are beneficial owners of such shares. The Service Plan
provides for compensation to the service organizations in an amount up to
.50% (on a annualized basis), of the average daily net asset value of the
Service shares.
At July 31, 1998, the Fund owed approximately $145,000, $99,000, $165,000
and $75,000 for Management, Distribution, Authorized Dealer Service and
Transfer Agent fees, respectively.
4. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and proceeds of sales or maturities of securities (excluding short-
term investments and futures) for the six months ended July 31, 1998, were
$207,762,050 and $159,147,140, respectively.
Included in these amounts are purchases and proceeds of sales or maturities
of governmental securities in the amounts of $22,616,817 and $26,644,596, re-
spectively.
The Fund has recorded a "Payable for forward foreign currency exchange con-
tracts" resulting from a closed but not settled forward foreign currency ex-
change contract of $25,956 in the accompanying Statement of Assets and
Liabilities.
For the six months ended July 31, 1998, Goldman Sachs earned approximately
$17,000 of brokerage commissions from portfolio transactions.
21
<PAGE>
GOLDMAN SACHS BALANCED FUND
Notes to Financial Statements (continued)
July 31, 1998 (Unaudited)
5. REPURCHASE AGREEMENTS
During the term of a repurchase agreement, the value of the underlying secu-
rities, including accrued interest, is required to equal or exceed the value
of the repurchase agreement. The underlying securities for all repurchase
agreements are held in safekeeping at the Fund's custodian.
6. JOINT REPURCHASE AGREEMENT ACCOUNT
The Fund, together with other registered investment companies having manage-
ment agreements with GSAM or its affiliates, transfers uninvested cash into
joint accounts, the daily aggregate balance of which is invested in one or
more repurchase agreements. The underlying securities for the repurchase
agreements are U.S. Treasury and agency obligations. At July 31, 1998, the
Fund had an undivided interest in the repurchase agreements in the following
joint account which equaled $26,600,000 in principal amount. At July 31,
1998, the repurchase agreements held in this joint account, along with
the corresponding underlying securities (including the type of security, mar-
ket value, interest rate and maturity date) were as follows:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
AMOUNT RATE DATE COST
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BEAR STEARNS COMPANIES, INC., $100,000,000 5.70% 08/03/98 $ 100,000,000
dated 07/31/98, repurchase price $100,047,500 (total collateral value
$103,015,560 consisting of GNMA: 6.50%, 08/15/27; FHLMC: 7.00%, 11/01/27;
FNMA: 9.00%, 11/01/25
-----------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE, 200,000,000 5.68 08/03/98 200,000,000
dated 07/31/98, repurchase price $200,094,667 (total collateral value
$207,985,925 consisting of FNMA: 7.00%, 03/01/28; FHLMC: 5.50%, 05/01/13)
-----------------------------------------------------------------------------
NATIONSBANK, 300,000,000 5.70 08/03/98 300,000,000
dated 07/31/98, repurchase price $300,142,500 (total collateral value
$306,061,477 consisting of FNMA: 6.50%, 11/01/12)
-----------------------------------------------------------------------------
NOMURA SECURITIES,
INTERNATIONAL, 450,000,000 5.70 08/03/98 450,000,000
dated 07/31/98, repurchase price $450,213,750 (total collateral value
$459,000,001 consisting of FNMA: 5.50%-9.00%, 07/01/99-08/01/28; FHLMC:
5.00%-8.50%, 12/01/98-07/01/28)
-----------------------------------------------------------------------------
SALOMON-SMITH BARNEY, 404,700,000 5.69 08/03/98 404,700,000
dated 07/31/98, repurchase price $404,891,895 (total collateral value
$413,162,707 consisting of FNMA: 6.50%-8.00%, 08/01/26-07/01/28; FHLMC:
8.00%-8.50%, 05/01/27-11/01/27)
-----------------------------------------------------------------------------
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $1,454,700,000
-----------------------------------------------------------------------------
</TABLE>
22
<PAGE>
GOLDMAN SACHS BALANCED FUND
7. LINE OF CREDIT FACILITY
The Fund participates in a $250,000,000 uncommitted, unsecured revolving line
of credit facility. In addition, the Fund participates in a $50,000,000 com-
mitted, unsecured revolving line of credit facility. Both facilities are to
be used solely for temporary or emergency purposes. Under the most restric-
tive arrangement, the Fund must own securities having a market value in ex-
cess of 300% of the total bank borrowings. The interest rate on the
borrowings is based on the Federal Funds rate. The committed facility also
requires a fee to be paid based on the amount of the commitment which has not
been utilized. During the six months ended July 31, 1998, the Fund did not
have any borrowings under these facilities.
23
<PAGE>
GOLDMAN SACHS BALANCED FUND
Notes to Financial Statements (continued)
July 31, 1998 (Unaudited)
8. SUMMARY OF SHARE TRANSACTIONS
Share activity for the six months ended July 31, 1998 and for the year ended
January 31, 1998 are as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JULY 31, 1998 JANUARY 31, 1998
(UNAUDITED)
---------------------------------------------------
SHARES DOLLARS SHARES DOLLARS
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Shares sold 2,230,239 $ 47,248,608 4,149,265 $ 84,252,017
Reinvestments of dividends
and distributions 103,689 2,180,849 521,497 10,355,369
Shares repurchased (872,134) (18,418,195) (942,243) (19,021,204)
---------------------------------------------------
1,461,794 31,011,262 3,728,519 75,586,182
-----------------------------------------------------------------------------
CLASS B SHARES
Shares sold 873,368 18,421,303 1,042,755 21,328,112
Reinvestments of dividends
and distributions 14,406 301,419 55,971 1,106,250
Shares repurchased (111,028) (2,332,022) (41,140) (847,100)
---------------------------------------------------
776,746 16,390,700 1,057,586 21,587,262
-----------------------------------------------------------------------------
CLASS C SHARES
Shares sold 407,086 8,573,337 441,362 9,200,739
Reinvestments of dividends
and distributions 5,443 113,645 14,762 290,280
Shares repurchased (64,943) (1,360,559) (17,257) (343,901)
---------------------------------------------------
347,586 7,326,423 438,867 9,147,118
-----------------------------------------------------------------------------
INSTITUTIONAL SHARES
Shares sold 75,472 1,597,473 422,391 9,058,228
Reinvestments of dividends
and distributions 6,299 132,534 24,982 494,072
Shares repurchased (63,815) (1,335,048) (34,951) (765,709)
---------------------------------------------------
17,956 394,959 412,422 8,786,591
-----------------------------------------------------------------------------
SERVICE SHARES
Shares sold 21,460 443,809 728 15,548
Reinvestments of dividends
and distributions 10 203 52 1,050
---------------------------------------------------
21,470 444,012 780 16,598
-----------------------------------------------------------------------------
NET INCREASE 2,625,552 $ 55,567,356 5,638,174 $115,123,751
-----------------------------------------------------------------------------
</TABLE>
24
<PAGE>
GOLDMAN SACHS FUND PROFILE
The Goldman Sachs Balanced Fund
THE GOLDMAN
SACHS ADVANTAGE
When you invest in the Goldman Sachs Balanced Fund, you can capitalize on
Goldman Sachs' history of excellence while benefiting from the firm's leadership
in three areas:
1 Global Resources
With professionals based in offices throughout the Americas, Europe and Asia,
Goldman Sachs possesses first-hand knowledge of the world's markets and
economies.
2 Fundamental Research
Goldman Sachs is recognized by the managements of corporations worldwide as a
leader in investment research. As a result, we obtain face-to-face meetings
with managers on a timely, regular basis.
3 Risk Management
Goldman, Sachs & Co. excels in understanding, monitoring and managing
investment risk --a process that is integrated into all Goldman Sachs
investment products.
An Investment Idea for the Long Term
History has shown that an investment composed of a blend of stocks and bonds
provides reduced volatility of returns while capturing the appreciation
potential of the portion invested in stocks.
Goldman Sachs Balanced Fund provides investors access to the benefits associated
with an investment that is composed of both stocks and bonds. The Fund seeks
long-term capital growth and current income through investments in equity and
fixed income securities.
Target Your Needs
The Goldman Sachs Balanced Fund has a distinct investment objective and a
defined place on the risk/return spectrum. As your investment objectives change,
you can exchange shares within Goldman Sachs Funds without an additional
charge./*/ (Please note: in general, greater returns are associated with greater
risk.)
- --------------------------------------------------------------------------------
Goldman Sachs Funds
ASSET ALLOCATION
Higher Risk/Return Lower Risk/Return
- -------------------------------------------------------------------------
INTERNATIONAL EQUITY DOMESTIC EQUITY FIXED MONEY
. Goldman Sachs INCOME MARKET
Balanced Fund
For More Information
To learn more about the Goldman Sachs Balanced Fund and other Goldman Sachs
Funds, call your investment professional today.
/*/ The exchange privilege is subject to termination and its terms are subject
to change.
<PAGE>
GOLDMAN SACHS ASSET MANAGEMENT
ONE NEW YORK PLAZA, 42ND FLOOR, NEW YORK, NEW YORK 10004
TRUSTEES
Ashok N. Bakhru, Chairman
David B. Ford
Douglas C. Grip
John P. McNulty
Mary P. McPherson
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard B. Strubel
OFFICERS
Douglas C. Grip, President
Jesse Cole, Vice President
James A. Fitzpatrick, Vice President
Anne Marcel, Vice President
Nancy L. Mucker, Vice President
John M. Perlowski, Treasurer
Philip V. Giuca, Jr., Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Valerie A. Zondorak, Assistant Secretary
GOLDMAN SACHS
Investment Adviser,
Distributor and Transfer Agent
Visit our internet address: www.gs.com/funds
This material is not authorized for distribution to prospective investors unless
preceded or accompanied by a current Prospectus. Investors should read the
Prospectus carefully before investing or sending money.
Goldman, Sachs & Co., distributor of the Fund, is not a bank, and Fund shares
distributed by it are neither bank deposits nor obligations of, nor endorsed,
nor guaranteed by any bank or other insured depository institution, nor are they
insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve
Board or any other government agency. Investment in the Fund involves risks,
including possible loss of the principal amount invested.
The Fund's foreign investments and active management techniques are subject to
risks in addition to those customarily associated with investing in dollar-
denominated securities of U.S. issuers. Compared with U.S. securities markets,
foreign markets may be less liquid, more volatile and less subject to
governmental regulation, and may make available less public information about
issuers. Funds that invest in foreign issues may incur losses because of changes
in securities prices expressed in local currencies, movements in exchange rates,
or both.
An investment in a money market fund is neither insured nor guaranteed by the
U.S. government and there can be no assurance that any money market fund will be
able to maintain a net asset value of $1.00 per share.
(C) Copyright 1998 Goldman, Sachs & Co. All rights reserved.
Date of first use: September 30, 1998 BALSAR / 47K / 9-98
